Cramer: Suspend GM Shares

You might think, with bankruptcy a virtual inevitability at this point, that General Motors shares would stop trading. After all, the stock’s chance for recovery is slim, if not completely hypothetical. But that hasn’t been the case. U.S. exchanges continue to peddle GM to glossy-eyed investors hoping for a dramatic turnaround. To say that this outraged Cramer would be an understatement.

He called GM stock “practically valueless,” a “charade,” a “pretend piece of paper” that may pay off “years down the road,” but only “if GM ever starts making a lot of money.” Owners of common shares are in “huge, gargantuan, probably indescribable trouble,” Cramer said, adding, “there’s basically no way for them to win.”

“If ever there was a screwed-up game,” Cramer said, “selling people shares of GM’s current common stock is it.”

General Motors on Tuesday saw what might have been its only chance of escaping bankruptcy disappear, as bondholders rejected the company’s shares-for-debt offering. Now the government’s June 1 restructuring deadline will be all but impossible to meet. Also, going forward the majority of GM’s shares will be held by Washington – up to 69% – with the United Auto Workers union holding 17.5%. In the end, common stockholders would own just 1% of the company.

Why then does this charade continue? Because just like AIG, Fannie Mae and Freddie Mac, GM boosts volume on the New York Stock Exchange. Put simply, brokers and exchanges benefit from the trading.

“And in their desire to make just a bit more money,” Cramer said, “they’ve made a joke of the market.”

Worst of all, the Securities and Exchange Commission is doing nothing to prevent this. Nor is any other government agency. That’s no surprise, though, because Washington is “completely oblivious to the day-to-day trading of all stocks,” Cramer said. Apparently it’s not in anyone’s interest to get rid of these zombie stocks, “except the public’s interest.” And the public is “duped daily in the market, as these stocks are fitting treats for investors who don’t know what they’re doing.”

We should be going out of our way to protect these investors, Cramer said, “if we ever want to get to a place where the market can be embraced by everyone, not just the…sharks that dominate it.”